BOI News

Govt To Expedite Oil And Gas Exploration

Sri Lanka has decided to expedite the long -delayed strategic oil and gas exploration and development plan, officials of the Petroleum Resources Development Secretariat (PRDS) said.

They also said the proposed Mannar petroleum exploration programme was a US$ 240 million worth petroleum data asset, inclusive of two gas discoveries. So far PRDS has made

Rs 700 million data sales and owns valuable petroleum data that may lead to massive production- sharing contracts in the immediate future.

During 2008 – 2015 a sum of US$ 26 million has been spent on petroleum exploration activities for local capacity building and procurement of local goods and services by the Operator of block M2 in Mannar (ex-Cairn SL 2007-01-001). Nearly 17 local suppliers transacted US$ 18M services during this period demonstrating a slow emergence of a new industry. Four local universities are assisted and guided to set up upstream petroleum- related course modules.

Realizing a Petroleum Exploration Development Plan, PRDS said that they had already decided to continue with a Joint Study with TOTAL of France,off the east coast – Blocks (JS5 & JS6) and commercialize natural gas discoveries in Block M2 of the Mannar Basin.

According to the proposed plan, other priority areas include, acquisition, marketing and licensing of 2D & 3D seismic, gravity and gravity magnetic data on a multi-client basis in several offshore locations covering three demarcated sedimentary basins, Mannar,

Cauvery and Lanka Basins and plans to call expression of Interest to explore few identified blocks in the Cauvery Basin on production sharing contractual terms, formulation of a natural gas policy aimed at all sectors with export potential and new business avenues is also a priority project, pricing/re-pricing petroleum data as a part of preparation to award remaining offshore acreage of Mannar and Cauvery Basins through approved investment models, find partnerships to proceed with remaining joint study areas of the Lanka basin.

The Government has now opened the Block M2 as part of a limited tender offer, to find a partner to appraise and develop the discovery of natural gas, as well as to explore for additional prospects.

The block contains two natural gas and condensate discoveries (Dorado and Barracuda) both of which were discovered by exploration activities in 2011.

The volumetric analysis of these two discoveries has indicated a combined potential reservoir capacity in excess of 2 TCF (Trillion Cubic feet) of natural gas and 10 million BBL (barrels) of condensate.

It said that the economic analysis of these two discoveries indicates a competitive gas price and about 11 oil and gas companies including few major exploration companies have already expressed their interest for this block and the Government expects to license this block by early 2018.

In terms of the final timing of first local gas production, this will depend on the gas price negotiations with future investors and the GoSL's acceptance of a Field Development Plan (FDP) based on it.

"The M2 block could be a reality by around year 2021, if the proposed bid round becomes a success and the natural gas potential timely tapped to be commercially feasible, for the commercial operations to commence," It stated.

In addition to the above discoveries, the Mannar basin has sufficiently thick and mature sedimentary deposits that may yield high quality oil and natural gas which would be adequate for the next sixty years.

Initial studies of well data and regional studies indicate that the source rocks have the potential to generate 5e billion barrels of oil and 9 trillion cubic feet of natural gas.

PRDS has already carefully mapped this risked potential that is yet to be explored and verified. Furthermore, it is planned to expedite the exploration in Cauvery and Lanka Basins through diversified licensing methods.

If all these exploration attempts would be successful, it is expected to initially result in the replacement of a significant component of imported distillate with domestic gas in our power generation mix, with subsequent application in both the transport and other sectors.

The availability of local natural gas will also help insulate Sri Lanka against the fluctuations of imported oil and coal into the foreseeable future and moreover towards energy security and environmental protection.